Government report shows equalising pensions for gay couples could cost £2.9 billion

Illustrated rainbow pride flag on a white background.

A joint review looking at equalising pension schemes for same-sex couples shows the government will have to “consider” the cost of changing the law.

The review was commissioned by the Department for Work and Pensions and the Treasury after ministers failed to use the passing of last year’s same-sex marriage act for England and Wales to close a legal imbalance.

The Equality Act 2010 contains a loophole allowing for private occupational pension schemes to ignore years of contributions by gay employees and limit survivor benefits for civil partners.

A succession of MPs and peers from all sides of the political divide pressed the case for the Marriage (Same Sex Couples) Act to close the loophole ahead of Royal Assent last year.

But the government resisted the demand and warned that the cost of equalising pensions would be too expensive.

The Department for Work and Pensions (DWP) subsequently announced a review of the imbalance, which on Thursday was published.

It stated: “The government has made it clear that it believes that it is right that married same-sex couples and civil partners should be treated equally to married opposite sex couples. That is why it has brought forward legislation to ensure that survivor benefits are now built up equally for all legal relationships.”

Acknowledging this measure was not enough to correct the imbalance, the review said: “However, pensions are unique in that the consequences of actions that were taken in the past are crystallised today, and therefore reflect the inequalities of the past in today’s pension outcomes.

“We know now that many schemes in the private sector have already equalised survivor benefits despite the cost.

“The review finds that reducing or eliminating the remaining differences in survivor benefits in the private sector would cost £0.4 billion, but that this cost would be concentrated in a relatively small group of schemes.

“Furthermore, the cost to the public service schemes would be £2.9 billion.”

The report concluded: “In considering its response to this review, the government will need to consider these costs and the potential impact on pension schemes, along with the wider consequences of making retrospective changes to scheme rules.

“As this review demonstrates, these are complex issues and the government will have to consider these very carefully before making a decision on whether the law should be changed.”

A government source told PinkNews that it was likely ministers would issue a response to the report before the end of 2014.